Investors are further assured that the stocks held in the index have nothing to do with borrowing or lending, women’s fashions, cosmetics, modern cinema, popular music, or pork.

Personally, I wouldn’t touch this fund with a barge pole. It is virtually guaranteed to earn sub-par returns.

Here’s why…

Investing in Sin Stocks vs. Socially Responsible Stocks

If you were given the choice six years ago between investing in the environmentally and socially responsible Sierra Club Stock Fund (Nasdaq: SCFSX) or investing in sin stocks with the Vice Fund (Nasdaq: VICEX), which invests primarily in tobacco, alcohol, defense and gambling, which would you have chosen?

I’ll give you a hint. Your profits would have been much bigger if your conscience weren’t your guide.

• The Sierra Fund has delivered negative returns over the past six years.
• The Vice Fund has delivered positive performance – and beaten the S&P 500 handily, too.

This is no aberration.

Merrill Lynch recently examined the performance of alcohol, tobacco and casino stocks in all recessions since 1970 and found that while the S&P 500 fell 1.5% on average, sin stocks rose an average 11%.

This downturn isn’t shaping up to be any different.

Sure, consumers are cutting their spending far more than in past recessions. But history shows that people do not drop their bad habits in hard times.

Rather many people feel an intense need to escape through alcohol, tobacco, or a trip to their local casino.

This is not too surprising.

If a citizen of ancient Greece or Rome were magically transported into the modern era, he would be astounded by the current state of agriculture, transportation, housing, medicine, architecture, technology and general living standards.

Humanity itself, however, would offer few surprises. We remain the flawed human beings we have always been, struggling with the same deadly sins our ancestors wrestled with millennia ago: greed, gluttony, sloth, pride, anger, envy and lust.

Investing in Sin Stocks Through The 7 Deadly Sins

Given this reality, when it comes to investing in sin stocks, four months ago The Oxford Clubunveiled its new Seven Deadly Sins Portfolio.

It is already up 41%, more than 10 times as much as the S&P 500.

We locked in a 92% profit in the casino stock Wynn Resorts (Nasdaq: WYNN) in 64 days. Our shares of Smith & Wesson (Nasdaq: SWHC) have doubled in less than four months. All but one of our positions are up over 20%.

Why are these vice stocks outstripping the broad market by such a wide margin? One answer is careful security selection.

But two other studies out of Yale and Princeton offer a further rationale.

• One study attributes vice stock outperformance to the lack of attention pension and other institutional investors pay to these stocks in order “to maintain an aura of respectability.” (That creates opportunity.)
• The other believes it’s because companies in sin industries benefit from high barriers to entry, thanks to strict regulations and taxation.

These factors are not likely to change.

I’m not endorsing the sin industries, incidentally.

I don’t smoke and I hope my kids never do. I don’t gamble unless the stakes are negligible. And I don’t own a handgun, although I am a supporter of Second Amendment rights.

Why Would Anyone Invest in Sin Stocks?

So why would I consider investing in sin stocks and these types of companies?

• Because my investment portfolio is a vehicle for achieving and maintaining financial independence, not for making grand moral statements.
• Consumers and investors have every right to patronize or own any legal, publicly traded business that creates jobs, pays taxes and allows citizens to enjoy their many freedoms.
• Moreover, you only need look at Afghanistan under the Taliban to see what a society unleavened by political, religion and economic freedoms looks like.

Last month French President Sarkozy made news when he said the burqua – a symbol of the repression and subjugation of women – “is not welcome in France.”

Shariah law isn’t welcome in my portfolio either. And the returns have been superb because of it.

Source:  Investing in Sin Stocks: How to Oppose Radical Islam in Your Portfolio

This from Greg:

The market has been kind to no one lately. Look no further than yesterday’s close for all the evidence most investors need to pack it up and hide their savings under the mattress for the next few years.

Unfortunately, most investors get it wrong. We all fight to pile into a hot stock, retreating once the share price plummets. Of course, that’s the exact opposite of what a savvy investor should be doing. Remember — it’s not about calling a bottom. It’s about buying low and selling high. It’s a simple concept that’s goofed seemingly every day when we let our emotions creep into our portfolios.

Right now, the market is low. Some of the beaten down stocks deserve to be in the basement. But like any bear market, there are some deals out there. So who’s bullish?

Minyanville.com CEO Todd Harrison is. Harrison told Yahoo! Finance that he believes a “monster move” is in store for stocks by spring.  Harrison isn’t a perma-bull, either. In fact, he’s been quite bearish for the better part of the past year. Now, he’s telling the press that the S&P could hit 1,000 very soon.

Harrison’s prediction is closely linked to financials. He told Yahoo! that financial stocks could spark a rally due despite the intense negativity in the sector. While we find this interesting, we wouldn’t follow Harrison into his Bank of America (NYSE:BAC), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC) plays just yet…

Berkshire Hathaway (NYSE:BRK.A / BRK.B)captain Warren Buffett has not been so publicly bullish…but the legendary stock picker hasn’t exactly stayed quiet on the investing front. Buffett has spent his time sniping shares of the industry leading bottom-dwellers like General Electric (NYSE:GE), Goldman Sachs (NYSE:GS), and Swiss Re.

You and I may not be able to purchase preferred shares through private deals or buy up corporate debt like Buffett is doing these days. But for individual investors with a small-cap focus, there are ways to play the recession and come out on top…

• First, you need to think cheap. No, we’re not talking about fundamentals (although it’s always good to take a look at price-to-sales, debt, and other important metrics before buying a stock). In this case, we mean cheap goods sold by discount retailers. When consumers are stretched thin, cheap stuff rules the roost. Don’t believe me? Just look at yesterday’s drop. As of 4:00 p.m., only one Dow component had posted a gain: Wal-Mart. For the small-capper, screen for retailers with market caps less than $1.5 billion and you should find some interesting plays related to this idea. And for this screen, avoid specialty retailers and stores that primarily sell big-ticket items.

• During tough times, sin wins… Sin stocks are the comfort food of troubled times. A consumer who recently lost his job probably isn’t going to go out and buy a new car. But by the same logic, he isn’t going to give up his beer and cigarettes, either. In fact, the best performing stocks during past recessions have been tobacco and alcoholic beverages.

• Find the necessities. We’ve already talked about the top two recession gainers from the chart above. But what about household products? Yes, families are cutting back. But we seriously doubt they’ll stop buying toilet paper and bleach just because they’re stretched thin. There are plenty of items every family can’t live without. Companies that make the goods should do just fine…

Source: Three Steps to Turn a Profit in This Recession